Why Would Wall Street Reward Earnings Season Losers?
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What is the main topic discussed in this episode?
With your Money Briefing, I'm J.R. Whalen at The Wall Street Journal in New York. During this earnings season, companies that have missed expectations have seen their shares actually rise. Why is that? We've got the answer in a moment. First, these money and market stories you should know. The instability of the housing market has turned the government's microscope to non-bank lenders. For the first time in recent memory, the Government National Mortgage Association, or GINIME, is asking several of the lenders to improve certain financial metrics before granting them the full ability to continue issuing mortgage bonds backed by the agency.
Why have some companies' shares risen after missing earnings this season?
Now, Ginnie Mae doesn't own or make mortgages, but it guarantees payments to investors on pools of loans made through other federal programs, ensuring there's enough capital to keep the mortgage market stable. But that puts it at risk if lenders suffer, and the agency is particularly exposed to non-bank lenders. And home price growth continued to slow in November, which the Journal Housing Team reports bolsters economists' predictions that price growth could slow to be more in line with increases in incomes and inflation this year price growth slowed considerably in the final months of last year compared to the beginning of 2018 when prices were growing more than six percent well for the rest of this year prices are expected to rise by two to three percent that could be welcome news for buyers who've been struggling with affordability as mortgage rates rose late last year
And why is New Jersey the butt of so many jokes? The Phoenix Wealth and Affluent Monitor says the state with the most millionaires per capita is in fact the Garden State, with just under a 9% ratio of millionaires to total households. The District of Columbia comes in at number two, followed by Connecticut. The report says the overall 7% rise in millionaire households in 2018 nationwide is the strongest rate of growth in that market since the financial downturn 10 years ago and sees a strong correlation between the growth in high net worth households and growth in the S&P 500. At the bottom of that list, by the way, were Arkansas, West Virginia, and Mississippi.
So far this earnings season, we've seen the usual mix of numbers that beat and miss Wall Street estimates. But what's unusual this earnings cycle is the number of companies missing estimates whose shares have actually risen.
How is Ginnie Mae responding to instability among non‑bank mortgage lenders?
Wall Street Journal markets reporter Michael Worsthorn is here to shed some light on this. and sort of unlock the mystery for us. So Michael, does this have a lot to do with low earnings expectations?
Coming into 2019, investors were preparing for the worst. So in a lot of ways, people were saying it wouldn't really take much to maybe get the market going again. And obviously what we're seeing now is that you have obviously a number of companies that are reporting pretty strong earnings. They're getting a boost. But then you have companies like Ford Fastenal, which is a tool distributor, and some others that are reporting more mixed earnings or actually weaker earnings in revenue. And you're seeing shares rise from that. And in a lot of ways, it's sort of a reversal from some of the punishing losses these companies suffered in December.
Still, there are many tech and industrial companies, especially those considered bellwethers, who've reported lower than expected numbers, and they haven't been so lucky.
That's sort of the market's way, I guess, of discerning sort of what's really going on here. Are we seeing sort of a slowdown that's just sort of in the economy or temporarily, or is this something that's bigger, maybe involving China? And we're sort of going through that. We saw Caterpillar. I mean, that was a company reported disappointing earnings. didn't get the same treatment as a Ford or a Fastenal, and you saw shares then fall. So it's not sort of this overjoyous piling into anything that's reporting right now, but there is some benefits for companies right now that maybe have been maybe oversold in December where they can recoup a little bit of those losses.
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Chapters
4 chapters
1
What is the main topic discussed in this episode?
0:05–0:41
2
Why have some companies' shares risen after missing earnings this season?
0:41–2:31
3
How is Ginnie Mae responding to instability among non‑bank mortgage lenders?
2:31–5:43
4
What do slowing home‑price trends mean for buyers and economists?
5:43–5:53
Speakers
2 identifiedMore from WSJ Your Money Briefing
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